It's time to take politics out of pensions

We can no longer trust politicians to take care of our pensions, say experts. Instead, they should hand control to an independent body...

Out with the old: Pensions and politics don't mix well, say experts

After years of political meddling, Britain's once-proud pensions system lays in ruins.

Criticised for being over-complicated and unrewarding, pensions have been rejected by millions of Britons, despite huge swathes of us facing terrifying gaps in our retirement savings.

Fewer than 40% of the working-age population has any pension whatsoever, thanks in no small part to an overly complex system that's constantly changing.

Now, as the coalition government battles to cut the UK's bulging deficit, pensions face the threat of the Chancellor's axe once again.

Already, we know the state retirement age is to rise with sharp and immediate effect, forcing millions of us to work into past our 70th birthday.

Meanwhile, public sector workers have braced themselves for dramatic cuts to their 'unsustainable' old age benefits.

And as if that wasn't enough, the new Government has now knocked a potential £100bn off the value of private final salary pensions in its first 'stealth cut'.

How can we plan for the future if every new government changes the pensions goalposts? How can we be sure our pots won't be unceremoniously raided in years to come?

We can't. It's as simple as that.

Experts fear that there may only be one way to make pensions good again: ban party politics altogether.

Giving power to an independent body, they say, could pave the way for the essential, sustainable reforms needed to stave off a nationwide retirement crisis. Finally, pensions could be made attractive again.

And after the emergency Budget left 'the most important pensions questions answered', the clamour to take politics out of pensions has intensified.

Former Treasury adviser, Ros Altmann, has called for a new non-political commission of the best pensions minds to work closely with new minister, Steve Webb, to overhaul the current system and introduce sustainable policies.

Once properly reformed, overall responsibility for Britain's pension system could then be permanently handed over to this independently-appointed body, ending the political toing-and-froing that has tainted the past 30 years.

Altmann said: 'We need an independent body responsible for pensions. These issues are too important to allow party politics to stop decisions being taken for the good of the country.

Ros Altmann: 'No more unhelpful meddling from politicians'

'If we had an independent body that's set in and lasts, we could begin to get to grips with what has become a very serious crisis by making sure that pensions policy stays out of political meddling in future.'

Every week a new report shows the financial torture awaiting many of the Britons who will retire in the coming decades.

Nearly 20% of over 55s still have a mortgage, with an average loan of £50,000, described by insurer Aviva as 'a significant debt burden'.

It smacks of an uncomfortable reality: a generation of Britons has lost touch with the 'savings culture', disillusioned by constantly flip-flopping pension saving rules and a general lack of clarity when it comes to state benefits in old age.

Now just 14.5m Britons - fewer than 40% of the working-age population - have any sort of pension, according to the Department for Work and Pensions.

In the 1950s pensions were easy, tinkering has made them complicated

Altmann said Steve Webb (pictured below, right), could be the 'first politician in years' who has the 'right ideas' for reinvigorating Britain's long-lost saving habit.

But Altmann was 'disappointed' that many important pensions issues were swept under the carpet in June's emergency Budget. She believes Mr. Webb will now need the support of a truly independent body if he is to foster the sustainable, durable system Britain so desperately needs.

'Pensions are an area where you can't think in the short term,' Altmann said. 'If you look back at the number of reforms and reviews in recent times an incredible amount of taxpayers' money has been spent, but to what avail?

'The past 13 years of political interference have been a disaster and have left pensions in dire need of urgent reform. We have a retirement crisis on our hands, but politicians are not in power long enough to undo the damage of recent years.'

Her call to action was echoed by other prominent figures within pension circles.

Pensions 'guru' and former head of pensions at Prudential, Steve Bee, said: 'It doesn't really matter who we have in parliament – there's been quite enough shooting from the hip on pensions.'

'Back in the 1950s we had a simple system, but over the years constant tinkering has arguably made it the most complex on the planet.

Bee added that this complicated system has only become a serious problem because it has been in constant flux.

'What we don't want is something that's changing all the time. If we're being asked to put money aside for 30, 40, 50 years – the best part of our lives – we need to be able to understand the system. We shouldn't constantly be looking over our shoulders, as we are now.

'One of the best ways to simplify pensions is to stop tinkering with them, and a standing commission would certainly be a step towards achieving this.'

Gordon Brown's great pensions raid

A prime example of the damage done to pensions by political wranglings is provided by one of former Prime Minister Gordon Brown's first acts in government in 1997.

As a fresh-faced, newly-appointed Chancellor he said he would be tapping pension funds for some extra revenue by scrapping the dividend tax credit they received.

It meant pension funds could no longer shield 100% of their investment dividends from the grasps of the taxman. The grand plan was that scrapping the relief would put an extra £5bn a year into government coffers. But in reality, the move would maul private pensions.

Bamford said shifting the control of pensions away from politicians might help those Britons keen on saving for retirement feel confident that they're doing the right thing.

He said: 'For pensions, the best result of the coalition would be to remove the area of pensions legislation from government control. Instead, an independent body should be established to control pension policy.

'This is something that requires long-term commitment and stability, rather than the sort of rule changes we have seen over the years. People saving for retirement need to have confidence that the pension rules in place today will still broadly be the rules when they retire in the future.

Why the experts support pensions independence

Tom McPhail, a highly-respected pensions expert at Hargreaves Lansdown, said he supported the prospect of an independent commission.

Long-term view: Joanne Segars, chief executive of the NAPF

'Politics and pensions have to learn to get along. We've wasted an awful long time in recent years failing to tackle critical long-term problems and time is fast running out. The long-term nature of pensions requires the sort of long-term thinking that politicians find difficult, given the short period they are in office.'

Robin Simmons, partner at Sackers, a leading pensions law firm, called for an end to the ministerial 'hot-desking' that has plagued recent years. During the previous Labour government's 13 years in office, there were nine secretaries of state and 11 junior ministers in a total of 15 different teams.

'We need a government that recognises the long-term nature of the pensions game and its predictable impact both socially and economically. A good start would be to stop the musical chairs around the role of pensions minister - the necessary tough decisions won't be taken by ministers hot-desking in this critical role.'

'Pensions are truly the elephant in the room. The new government needs to swallow some bitter pensions pills in its attempt to set the nation on the right course for long-term economic and social stability.'

Mike Morrison, head of pensions development at Axa Wealth, called for a holistic look at the pensions system.

'A big picture view of pensions was conspicuous by its absence in all of the main parties' manifestos during this year's election,' he said.

'What is needed is for politicians to stop tinkering with piecemeal reforms and look at the issue of pensions as a whole.'

Joanne Segars, the chief executive of the National Association of Pension Funds (NAPF), agreed. She said: 'The political interference, short-term fixes and changes of political direction cannot be permitted to continue.'

'There should be a small independent commission with a wide range of voices set up to keep pensions on track in the long run. This would help insulate pensions from knee-jerk changes in direction and provide much needed stability.'

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